Business Analytics: Or – lies, lies and damn statistics?

Business Analytics (BA) is fast becoming the driver for strategic decision-making; more so, however, for the large than small company. The larger the organization the more likely it is to use BA to drive strategic thinking and strategic decision-making, whereas the smaller organization is more likely to use metrics for operational matters, such as, cash-flow management and HR resource allocation.

What is Business Analytics?

Companies and corporations today are accumulating enormous amounts of information in numerical, text and graphic form in the business transaction process. Data mining (DM) is but one method of extracting knowledge from masses of data, however, DM is not good at extracting data from information in graphical form. Thus, the real challenge in all this is how to translate text and graphics into meaningful statistical data. Text-to-data tools have been available for many years so that is not the problem, graphics to data is.

How to use the knowledge generated from BA is critical in extracting value for the business. It is also central to creating a knowledge-centric business. The major challenge, however, is to make sense of the knowledge generated from the data and to represent that knowledge in a manner that is easily understood and embedded in the corporate culture and company-wide strategic decisions.

The real hurdle in all this is the fear of statistics and what they represent.

Remember Benjamin Disraeli (Queen Victoria’s Prime Minister) who is credited with the saying: “There are three types of lies: lies, damned lies, and statistics”. And, as a wise sage once said: “Statistics can be used as drunken men use lampposts – for support rather than for illumination”.

So, how can statistics be used?

Statistics can be used to: justify actions, guide actions, prescribe actions – or to bury the obvious in a blizzard of snow!

Proponents of the latter option soon come to realize this has no value whatsoever over the long-term. In fact, it has great potential to do oneself and the company more harm than good!

BA has great potential to identify the specific profit drivers of your business from a mass of data. The real benefit of that knowledge is the opportunity to allocate resources to those activities that (as one smart scribe stated eons ago) generates the greatest ‘bang for the buck’!

The greatest benefit of BA is that it allows one to model a range of possible outcomes from a series of options, and to allocate finite resources to the option most likely to generate optimal returns on resources expended.

SOG has found BA to be particularly effective at developing the next generation of CEOs. How best to know if the CEO waiting in the wings is made of the ‘right stuff’ to take on the challenges in managing the corporation? Business Analytics!

Give the CEO-in-waiting a $100m business with the instructions to grow it into a $300m corporation in quick time and place him or her in a team of competing aspirants to the top job. One will very quickly identify those who have what it takes to be successful – and those who don’t!

How can your organization (either public or private) do this?

Use business simulations!

What one looks for is not whether a participant makes a mistake. We all do that. It is how they recovered the situation after the mistake and were they working within a coherent strategic framework.

Or is it all lies, damn lies, and statistics!